Invest for Retirement, Don’t Save

The perceived downside risk of stocks often sends those planning for retirement running to the safety that bonds provide.

The problem with that strategy, though, is that building an adequate nest egg is a race against time. Bonds just don’t generate enough money to cover the cost of living once your work days are done. That 4% return barely outpaces inflation.

The same goes for vehicles like stable-value funds. As Cramer said, they offer slightly better returns than money-market funds and slightly worse returns than a high-quality bond fund.

Cramer wasn’t saying that bonds have no place in a portfolio. But stocks come first. His suggestion: Buy a cheap S&P 500 index fund. It’s usually a good proxy for the market’s high-quality stocks.

Here’s Cramer’s retirement-planning breakdown for bond ownership:

He sees no reason to own bonds during your 20s

In your 30s, 10%-20% of a retirement portfolio can be in bonds

The number climbs to 20%-30% in your 40s

30%-40% in your 50s

from age 60 until retirement, bonds should be 40%-50% of your portfolio

Even in retirement, though, you should still own stocks, Cramer said. We’re living a lot longer these days, and not owning stocks is a bet against your own longevity.